Italian bonds, euro see second day of gains

LONDON (Reuters) – World stocks, the euro and Italian bonds all made a second day of gains on Thursday, after renewed efforts from politicians in Rome to form a government and data from China had pointed to its giant economy performing well.

The moves meant Milan’s bourse was 0.7% higher, Britain’s FTSE and France’s CAC added 0.2-0.4%, though Germany’s DAX stalled after a report that President Donald Trump aims to push German carmakers out of the United States.

Wall Street looked set for a flat start in New York, meaning it was the euro and the bloc’s bond markets that continued to make the most significant moves.

Italy’s two-year government bond yield, which has been the focus of a selloff, was down as much as 95 basis points (0.95 percentage point) at just over 1%, while the euro climbed to $1.1690 after its biggest jump since early January on Wednesday.

Rome’s benchmark 10-year bond yield was down 33 bps at 2.68% and the closely watched Italy/Germany 10-year bond yield spread tightened to 248 bps, as much as 22 bps tighter than the previous day’s close.

“It seems at least the 5-Star movement is making an effort to form a government. Apparently they have been given a day to try,” said ING strategist Martin Van Vliet. “The market is just rallying hoping that new elections may avoided.”

Asia’s mood overnight had been lifted by data showing growth by China’s vast manufacturing sector accelerated strongly and well above forecasts in May to an eightmonth high.

It gave bluechip Chinese shares their best day since August 2016 with gains of just over 2%.

Hong Kong’s Hang Seng rose over 1% and MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.8% as it clambered off near two-month lows.

“We have about 25% in Asia,” said Jake Robbins, a global equities fund manager at Premier Asset Management. “China is the second biggest economy in the world and it is growing very, very quickly.”

Tokyo’s Nikkei meanwhile added 0.8%, helped by a settling of the yen which has been drawing in buyers during the recent rise in Italian and euro zone uncertainty.

The euro’s rise came as two polls in Italy showed 60-72% of respondents wanted the country to remain part of the euro. The prospect that populist parties there could push to leave the currency is the big concern for financial markets.